Trusts and Tort Compensation Lloyd Dixon June 2013 Email dixonrandorg Phone 3103930411 x7480 There Is a Great Deal of Controversy About the Interactions Between the Trusts and the Tort System ID: 221289
Download Presentation The PPT/PDF document "Asbestos Bankruptcy" is the property of its rightful owner. Permission is granted to download and print the materials on this web site for personal, non-commercial use only, and to display it on your personal computer provided you do not modify the materials and that you retain all copyright notices contained in the materials. By downloading content from our website, you accept the terms of this agreement.
Slide1
Asbestos Bankruptcy Trusts and Tort Compensation
Lloyd DixonJune, 2013
Email : dixon@rand.org
Phone: 310.393.0411 x7480Slide2
There Is a Great Deal of Controversy About the Interactions Between the Trusts and the Tort System
Are plaintiffs able to recover once in the tort system and again from trusts?
Is the liability of the remaining solvent defendants adjusted to take account of trust payments?
Is the information used to recover from the trusts available in the tort case? Slide3
Plaintiffs Can Recover from Trusts and Through the Tort Process
Plaintiff
Tort claims
Trust claims
Settlements
Trial
D verdict
P verdict
Claim evaluation
Payment
No
payment
Verdict molding
Payment Slide4
The Are Multiple Linkages Between the Two Systems
Plaintiff
Tort claims
Trust claims
Settlements
Trial
D verdict
P verdict
Claim evaluation
Payment
No
payment
Verdict molding
Payment
Setoff linkage
Indirect
claim linkage
Information linkage
Trust payment limitation linkageSlide5
We Investigated these Linkages in Six States
States with joint and several liability
Illinois
PennsylvaniaWest VirginiaStates with some form of several liabilityCalifornia
New YorkTexasSlide6
Findings on Linkages
Information linkageAll six states require disclosure of trust claims that have been filed
But trust claims are frequently not required to be filed before trial
Setoff linkageFour of the states allow setoffs for all pre-verdict trust paymentsCalifornia and Pennsylvania do not in some circumstancesSlide7
Findings on Linkages
Indirect trust claimsAllowed in joint-and-several-liability states if defendant satisfies part of a trust’s liability and meets trust payment criteria
However, defendant often needs plaintiff’s cooperation to develop exposure information
Trust payment linkage limitationProvisions at some trusts prohibit payments to direct claimants it trust’s liability has been satisfied by another partySome trusts also require direct claimants to indemnify trusts for future indirect claimsSlide8
To Investigate Potential Outcomes, We Constructed the Following Thought Experiment
Pre-reorganization scenario
All potential defendants are solvent
Jury returns plaintiff verdict allocating liability in accordance with state lawPost-reorganization scenarioSame verdict, same stateSome of the defendants are reorganized with trusts paying claims in their placeSlide9
Potential Effects of Trusts Depend Importantly on the Liability Regime
Potential Impact of TrustsJoint and Several LiabilitySeveral
Liability
Total plaintiff compensation
Decrease
No
change
Increase
Payments by defendants that remain solvent Decrease No change
IncreaseSource: Asbestos Bankruptcy Trusts and Tort Compensation, RAND Corporation, MG-1104, 2011.Slide10
We Identified Outcomes that Are Not Consistent with Liability Principles
In states with joint-and-several liability
Defendants might not be able to take advantage of all the resources available from the trusts
In states with several liabilityDefendants might in effect pay the shares of bankrupt partiesPlaintiffs could fully recover fully in the tort case and more from the trustsSlide11
Trust Overpayments in Several-Liability States Could Adversely Affect Some Plaintiffs
Trust payment percentage might need to be lower
Particularly affected plaintiffs include
Those exposed only to the products and practices of bankrupt partiesThose with non-malignant injuries Slide12
What Drives the Potential Increase in Plaintiff Compensation in Several-Liability States?
Potential increase in total plaintiff compensation is not because setoffs for trusts are different than those for other settlements
What is different when trusts are involved?
Plaintiff can recover trust payment after tort case has been terminatedNo mechanism to adjust payments by solvent defendants for post-verdict trust payments
Indirect claims are not available to adjust for pre-verdict trust payments that don’t result in setoffsSlide13
Key Determinant of Outcomes Is Availability of Evidence on Exposures to Products and Practices of Bankrupt Firms
When evidence on such exposures is developed
In joint-and-several liability states:
payments by solvent defendants will be adjusted to reflect compensation available from the trusts
In several-liability states: payments by solvent defendants will not change
When evidence on such exposures in NOT developed
In joint-and-several
liability
states:
defendants might not be able to take advantages of resources available from the trustsIn several-liability states: defendants can be required to pay more than their share of the harm and plaintiffs can recover more Slide14
We Found Considerable Disagreement Over Who Is Responsible for Developing Exposure Evidence on Bankrupt Firms’ Products
Plaintiffs’ attorneys argue that defense attorneys can use discovery tools to uncover exposure information
Plaintiffs’ attorneys are not responsible for doing the job of defense attorneys
Defense attorneys respond that plaintiffs’ attorneys can influence the exposures plaintiffs recallWithout plaintiff co-operation, it is very difficult to develop the information needed to recover from trusts and assign fault to bankrupt firmsSlide15
We Are Developing Evidence on Which Potential Effects Occur in Practice
Selecting mesothelioma claims for plaintiffs with similar exposure histories
Same primary jobsite
Similar years worked at siteComparing exposures identified by plaintiffs in Claims filed before the bankruptcy of a firm commonly named at the site pre bankruptcy with
Claims filed post bankruptcySlide16
Findings Have Important Policy Implications
Substantial changes in product identification would suggest that outcomes inconsistent with tort principles would be occurring
Legislative and court reforms would be warranted to remove incentives for strategic behavior in product identification Slide17Slide18
The Number of Trusts Grew Substantially Between 2003 and 2007
Trusts
held $18 billion in assets at the end of
2011
Source
: Dixon
, McGovern, and Coombe,
Asbestos Bankruptcy Trusts
, RAND, 2010
;
GAO, Asbestos Injury Compensation, 2011; Scarcella, 2012.Slide19
Trust Payments Are Likely a Significant Proportion of Overall Compensation
Source: Carroll et al.,
Asbestos Litigation,
RAND, 2005; Dixon, McGovern, and Coombe,
Asbestos Bankruptcy Trusts, RAND, 2010; GAO, Asbestos Injury Compensation, 2011.Slide20
Assigning Fault to Bankrupt Firms or Trusts
State
Can Bankrupt Firms or Trusts Be Placed on the Verdict Sheet?
Joint-and-several liability states
IL
No
PA
No, except for a few older trusts
WV
Remains an open question
Several-liability states
CA
Yes
NYYesTX
Yes Slide21
Filing and Discovery Requirements for Trust Claim Forms
State
Are Plaintiffs Required to Disclose Trust Claims that Have Been Filed?
Is There a Requirement on When Trust Claims Must Be Filed?
Joint-and-several liability states
IL
Yes
No
PA
Yes
No, except in Montgomery County
WV
Yes
No, but Ps must identify all trust claims 120 days before trialSeveral-liability states
CAYesNo
NYYesYes, claims must be filed 90 days before trial
TXYesNoSlide22
Setoffs for Pre-Verdict Trust Payments
State
Are Setoffs Allowed for Pre-Verdict Trust Payments?
What Type of Setoffs Is Allowed?
Joint-and-several liability states
IL
Yes
Pro-tanto
PA
Typically no
Pro-tanto
WV
Yes
Pro-tantoSeveral-liability states
CANot for noneconomic damagesPro-tanto
NYYesMax of amt paid and % of fault assigned to settling parties
TXYes when total recovered would exceed verdictPro-tantoSlide23
Indirect Claims
Available in joint-and-several liability states whenVerdict is fully satisfied
Indirect claimant satisfied payment criteria required of the direct claimant
Not available in states with several liabilitySlide24
Trust Payment Limitations
Many trusts prohibit payment to direct claimants when the trust’s liability has been satisfied by another party
Many trusts require the direct claimant to indemnify the trust for future indirect claimsSlide25
Bottom Line
Identified circumstances under which replacement of once-solvent defendants by trusts can
Allow plaintiffs to recover fully in tort an then recover more from trusts
Prevent defendants that remain solvent from receiving benefit of the funds available from trustsAlso identified circumstances under which plaintiffs recover less Highlighted importance development of information on exposure to bankrupts’ products and practices